A very expensive learning experience has taken place with my family in regards to a life insurance / pre-paid funeral plan that was purchased by my parents. We have learned that it is ‘common knowledge’ to those involved within the insurance industry: If you die within two years of purchasing a life insurance policy, it is the normal practice for the insurance company to contest the policy.NOT knowing this fact will now cost my mother over $8,000. My father passed away last August; 16 months after purchasing a funeral plan through an insurance company.

This policy was purchased to cover all of his final expenses. In our case, even though the insurance agent agreed with all of the boxes checked on the insurance application, the parent company has now contested the policy, rejected it, considered it void, and returned the premiums paid to date. I should note that his cause of death had absolutely nothing to do with the reason the policy has been cancelled.My mother is now obligated to pay about $8,000 for what we all thought was a pre-paid funeral plan.

Many people are buying these types of insurance policies, recently. I just received another mailing yesterday on this same subject from another local mortuary, in which it implies a “lot of guilt” if you do not take care of these matters prior to your own death, leaving the family with your financial burden.

Please pay attention to the total premium costs on this type of policy. If you are elderly, your premiums can end up far exceeding the payoff value of the funeral plan. You may be better off just saving up the money yourself.

In our case, if he (my father) lived over two years but less than about four years, the insurance purchase would have been financially beneficial. Otherwise, the total premium payments from year four to year 10 in a 10-year payment plan are almost 2 1/2 times in excess of the current funeral costs. Obviously, the insurance agent has a sales pitch to tell you of the advantages of buying a policy, many of which may have merit, but YOU need to decide what is best for you and your family. Be aware of what you are purchasing; the two year contestability clause was NOT on the insurance application, but was in the fine print of the actual policy received later. I am told that there was a 30 day period in which the new policy could have been cancelled, when first received. I should state that I understand why the insurance companies have clauses like this, and why it is in their interest to withhold any pay-outs if possible. This is a business contract, and they are in business to make money. The sad part here is that as uninformed purchasers of the policy, and the premature death of my father, this business contract did not work out in my parents’ favor.